Tier 1+ (Common)

I don’t think this one is actually in the game. On destinydb.info, there is an itemthat looks like it was probably intended to upgrade the S-10 to the S-11, but it is clearly incomplete, and I can’t find any mention of the S-11 or the upgrade item in the guide.

There are several ways to obtain a tier two sparrow. The S-10V is a timed exclusive pre-order bonus from GameStop, and I have no idea how it will be obtained once the timed exclusivity expires. The S-20 models can be acquired by turning in Deployment Orders obtained from the Exclusion Zone story mission (level 15). It is unclear if you can pick an S-20, or if you simply receive the one for your class. Finally, the S-2X series can be purchased from the shipwright for 2250 glimmer. In the beta, it was possible to use any sparrow with any class, but this might be changed in the final release. Also, you received your classes S-20 for collecting all 5 gold chests on Earth, but I am almost sure this will no longer be the case. It is also possible that you won’t be able to buy any S-2X series sparrows before turning in the Deployment Orders.

Tier 3 (Rare)

These are obtained by reaching reputation level 3 with the respective faction, and then purchasing one for 175 marks. This is a very high price as you can only get 100 marks for each faction per week, and you can use them to instead get legendary weapons for 150 marks, legendary helms for 120 marks, legendary class items for 30 marks, or any other legendary armor for 65 marks (note that legendary armor will help raise your light level significantly).

Tier 4 (Legendary)

For this tier you use one of the above upgrade items to upgrade your rare (tier 3) sparrow. The Emerald Coil will add a green contrail while boosting, the Stealth Drive will add a red contrail while boost, and the Void Drive will add a purple contrail while boosting. It appears that the Plama Drive doesn’t add a contrail. An upgrade can be purchased for 10 Strange Coin from Xûr, Agent of the Nine. Again, this cost is ridiculously high. You can get one Strange Coin by completing the Scourge of Winter story mission (level 12) the first time, and turning in the Strange Trinket to the cryptarch. Otherwise, Strange Coins can potentially be obtained by getting gold ranks on public events once a day (you won’t always get a Strange Coin though). Furthermore, you can also use your coins to purchase exotic weapons for 9 Strange Coins, exotic armor for 7, or weapon telemetry (which increases weapon experience gains) for 1.

Tier 5 (Legendary)

From the description of the Lightbearer, it appears to obtained from the Trials of Osiris. Since the Lightbearer is obtained from PVP, I would guess that the Timebreaker is obtained from high level PVE, likely epic strikes, or the Vault of Glass, but I’m really not sure. It is possible you will need to upgrade your tier 4 sparrow into one of these two, but I sort of doubt it.

Tier 5+ (Exotic)

I have no idea how this sparrow is obtained, or if it is actually in the game at all. The name is related to light, and the description mentions something about time, so it may somehow be a combination of the XV0 and the SV7, but that is pure speculation, and likely not the case.

Sparrow Shader

It may be possible to use a shader on your sparrow. There is an item called Vehicle Shader Template, but it isn’t clear how one would use it as it is a material instead of a consumable, and vehicles don’t have normal item upgrades. It also isn’t clear if you somehow apply a shader specifically to the sparrow, or if your general shader is applied to the vehicle. I suspect this item isn’t actually in the game. On a related note, there is also a Ship Shader Template, which would be awesome.